603 B.R. 94
Bankr. D.N.M.2019Background
- Debtor Jama Fontaine filed Chapter 7 on Dec. 12, 2012; HSBC (as trustee) had a pending state-court foreclosure where the judge granted summary judgment pre‑petition.
- A seven‑page Foreclosure Judgment was submitted pre‑petition but was entered in state court on Dec. 13, 2012 (one day after the bankruptcy filing).
- HSBC had no notice of the bankruptcy when it submitted the judgment; Debtor received the judgment and filed a Notice of Automatic Stay in state court the next day.
- HSBC later scheduled multiple foreclosure sales (2013–2016) based on that judgment; Debtor obtained a Chapter 7 discharge (Mar. 19, 2013) and the case closed.
- Debtor reopened the bankruptcy case in 2018 and sought sanctions: (1) the Foreclosure Judgment violated the automatic stay and is void; (2) HSBC willfully violated the stay and owes damages; and (3) HSBC violated the discharge injunction by post‑discharge collection efforts.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the post‑petition entry of the Foreclosure Judgment violated the automatic stay | Judgment entry was post‑petition and thus void as an action against estate property | Entry was a mere ministerial act confirming a pre‑petition oral ruling and not barred by the stay | Entry violated the automatic stay and is void (not a purely ministerial act) |
| Whether the stay violation was willful and what damages are recoverable | HSBC knowingly or should have known and failed to remedy after notice; Debtor seeks actual and punitive damages | No actual knowledge; if violation, laches should bar relief; punitive unwarranted | Violation was willful (HSBC failed to remedy after notice); Debtor entitled to actual damages (attorney fees); punitive damages denied |
| Whether laches bars Debtor’s claim for stay violation damages | Delay was excusable given confusion and litigation strategy | Debtor unreasonably delayed >5 years and should be barred | Laches not applicable: delay inexcusable but HSBC failed to prove material prejudice; laches denied |
| Whether HSBC's post‑discharge actions violated the discharge injunction | Post‑discharge notices and reliance on the judgment coerced collection of discharged debt | Actions were in rem (foreclosure activity) or informational, not attempts to collect personally | No violation of the discharge injunction (in rem foreclosure efforts and informational notices permitted) |
Key Cases Cited
- Ellis v. Consol. Diesel Elec. Corp., 894 F.2d 371 (10th Cir. 1990) (actions in violation of the automatic stay are void)
- Calder v. 907 F.2d 953 (10th Cir. 1990) (stay violation void even without actual notice)
- Soares v. Brockton Credit Union, 107 F.3d 969 (1st Cir. 1997) (ministerial‑act test; ministerial when no judicial discretion remains)
- Papatones v. 143 F.3d 623 (1st Cir. 1998) (entry as clerk’s ministerial docketing after pre‑petition oral direction may not violate stay under certain state rules)
- Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522 (2d Cir. 1994) (ministerial docketing distinguished from judicial acts)
- Johnson v. Home State Bank, 501 U.S. 78 (1991) (discharge extinguishes personal liability but leaves in rem rights against collateral intact)
- Johnson v. Smith (In re Johnson), 501 F.3d 1163 (10th Cir. 2007) (standard for willful stay violation: knowledge of the filing and intentional act; specific intent not required)